EY
ey.com/globaltaxguides
+973 1753-5455
Mail address: Fax: +973 1753-5405 P.O. Box 140 Manama Bahrain
Street address: 10th Floor East Tower Bahrain World Trade Center Manama Bahrain
Principal Tax Contact
ï‚« Ali Faisal AlMahroos
+973 1713-5119
Mobile: +973 3434-3440
Email: ali.almahroos@bh.ey.com
Business Tax Services and Global Compliance and Reporting
ï‚« Koen Desloover +971 4701-0087
Mobile: +971 (56) 415-8992
Email: koen.desloover1@ae.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
ï‚« Joe Kledis
+973 1753-5455
Mobile: +973 3356-1183
Email: joe.kledis@bh.ey.com
Aaron Stonecash +973 1753-5455
Mobile +973 3360-1118
Email: aaron.stonecash@bh.ey.com
James Norman Newnham +973 1751-4742
Mobile +973 3356-1182
Email: james.norman.newnham@bh.ey.com
Jay Smith +973 1751-4976
Mobile +973 3360-1050
Email: jay.smith@bh.ey.com
Miranda Baas +973 1751-4890
Mobile +973 3361-1185
Email: miranda.baas@bh.ey.com
International Tax and Transaction Services – Transfer Pricing
ï‚« Patrick Oparah
People Advisory Services
ï‚« Roman Gusev
+966 (13) 840-4600
Mobile: +966 593-891-888
Email: patrick.oparah1@sa.ey.com
+973 1753-5455
Mobile: +973 3365-1121
Email: roman.gusev@bh.ey.com
ï‚« Xavier Delaunay +971 4312-9489
Mobile: +971 (56) 406-1072
Email: xavier.delaunay@ae.ey.com
Indirect Tax
ï‚« Ali Faisal AlMahroos +973 1713-5119
Mobile: +973 3434-3440
Email: ali.almahroos@bh.ey.com
Adrian D Smith +973 1713-5182
Mobile +973 3353 1226
Email: adrian.smith2@bh.ey.com
A. At a glance
* Oil and gas companies are subject to a special income tax (see Section B).
B. Taxes on corporate income and gains
Except for the income tax levied on oil and gas companies, no taxes are levied on corporate income or gains. Oil and gas companies are subject to tax on income derived from the sale of finished or semifinished products manufactured from natural hydrocarbons in Bahrain and from the sale of such raw materials if produced from the ground in Bahrain. The rate of tax is 46%.
C. Other significant taxes
The following table summarizes other significant taxes.
Value-added tax (VAT); the scope of VAT includes supplies of all goods and services made in Bahrain as well as imports; certain supplies are zero-rated or exempt
Standard
Customs duties; effective from 1 January 2003, the customs duties of the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) are unified; Bahrain applies the unified tariff in accordance with the Harmonized System codes, issued by the World Customs Organization (WCO); under the unified customs tariff, for all products, except for tobacco and tobacco-related products, customs duties are calculated by applying percentage rates; for tobacco and tobacco-related products, the customs duty equals the higher of an amount calculated by applying a rate of at least 100% to the value of the product or an amount based on the quantity or weight; in general, products are divided into four groups
Rates for the four groups
Excise duty; imposed on goods harmful to human health and the environment that are listed by the GCC Financial and Economic
Free duty/ 5%/20%/100%/125%
Social insurance contributions; collected by the Bahraini social security authorities (the Social Insurance Organization [SIO]); payable on compensation of up to BHD4,000 per month for each employee
Pension fund contributions; applicable to base salaries and fixed allowances of Bahraini nationals; paid by Employer
(The contribution rate for the employer is being increased by 1% on a yearly basis from January 2023 until 2028, when it will reach a rate of 17%.)
Employee
Insurance against occupational hazard; applicable to base salaries of Bahraini nationals and expatriates; paid by employer
Insurance against unemployment; applicable to base salaries of Bahraini nationals and expatriates; paid by employee
(Non-Bahraini GCC nationals are not covered by the Bahraini social security scheme, as they will continue to be subject to their home country’s social security scheme based on the framework agreement signed between all GCC countries (Unified Law of Insurance Protection Extension for the GCC States Citizens Working Outside their Countries in any of the Council State Members). The home country social security contributions will be collected by the SIO and transferred to the home country’s social security authorities (details of the process depend on the specific home country.)
Municipal tax; payable by companies and individuals renting property in Bahrain; the tax rate varies according to the nature of the property and the payer of the utilities (that is, landlord or tenant)
Foreign workers levy; payable monthly by all private and public companies with respect to each employed expatriate
BHD5 for the first five expatriate employees and BHD10 for each additional expatriate employee
D. Miscellaneous matters
Foreign-exchange controls. Bahrain does not impose foreignexchange controls.
Base Erosion and Profit Shifting. On 11 May 2018, the Organisation for Economic Co-operation and Development (OECD) announced that Bahrain has joined the Base Erosion and Profit Shifting (BEPS) Inclusive Framework (BEPS IF). As a BEPS Associate, Bahrain will be able to work alongside the OECD and G20
155 countries on developing standards on BEPS-related issues and the implementation of monitoring processes. Bahrain is also now committed to implementing the minimum standards of the BEPS plan, which are Actions 5, 6, 13 and 14. In addition, in line with BEPS Action 5, Bahrain enacted legislation concerning economic substance requirements for certain regulated financial activities, effective from 1 January 2019, as well as for certain nonregulated activities, effective from 1 July 2019. Companies engaged in banking, insurance, fund management, investment holding, financing and leasing, distribution and service center, headquarter companies and intellectual property activities in Bahrain should meet the substance requirements. All in-scope entities are required to file an annual report to the authorities within three months after the end of their financial year. Failing to do so may result in penalties, fines, spontaneous exchange of information and potential deregistration.
In line with the Pillar Two rules on global minimum tax, Bahrain has announced a general intent to introduce corporate income tax beyond the oil and gas sector, as well as Pillar Two laws. There is no public information on the structure or content of such legislation as of now. Additionally, regardless of whether Bahrain introduces corporate income tax/Pillar Two rules, multinationals operating in Bahrain may be exposed to Pillar Two implications in those jurisdictions in which they are present if the jurisdictions have introduced such rules.
Country-by-Country Reporting. In accordance with BEPS Action 13, Bahrain introduced Country-by-Country (CbC) Reporting legislation, which is applicable for fiscal years beginning on or after 1 January 2021. The rules apply to multinational groups with consolidated revenue above BHD342 million (USD907 million). Bahrain-headquartered multinational groups are required to file their CbC Report and notification in Bahrain. Bahrain entities belonging to foreign multinational groups may be subject to CbC notification requirements.
End of service benefit changes for non-Bahrainis/non-GCC nationals. Bahrain implemented a new system for the payment of endof-service benefits for non-Bahraini employees. The new system requires private sector employers to update their employees’ salary details on the SIO portal.
As of 1 March 2024, the end-of-service benefit amounts should be paid to and collected by the SIO on a monthly basis.
The following are the monthly percentages to be collected by the SIO for the end-of-service benefits:
• 4.2% per month in the first three years of employment (zero to three years); that is, half a month’s wage per year
• 8.4% per month for each subsequent year of employment (three-plus years); that is, one month’s wage per year
The SIO will issue the following two separate monthly invoices to the employer:
• One for the monthly contributions of Bahraini and GCC workers (which is issued under the traditional system and remains unchanged)